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U.S. Postal Service Gets 6% Rate Hike

The cost of mailing a letter within the U.S. will go from 46 to 49 on January 26, 2014.

The three-cent increase is temporary, only good for two years, so that the USPS can catch up on its debts. Without it, the letter rate next year would only have been 47, another penny, held down by the low rate of inflation. The Postal Service had hoped the three-cent increase would be permanent.... but in two years, the rate of inflation may have caught up anyway.

Until the rate change, you can buy Forever stamps at 46 and use them to mail a letter after the rate goes up to 49...without paying anything additional.

Other rates are also going up, such as postcards, bulk advertising mail, periodicals and packages.

The U.S. Postal Service has been losing money, partly because mail volume is down because of the Internet, and partly because the agency has to pay $5.6 billion dollars every year into a federal benefits fund. Without that payment, the USPS actually would have had a slight profit this past year.

The Postal Service can’t increase regular mail rates by more than the rate of inflation without permission of the Postal Regulatory Commission — which it now has. However, it can raise — or lower — the price of other services, such as expedited shipping....to stay competitive with companies like FedEx and UPS.

We'll post more details here as we get them. Our earlier story on the rate-hike request is here.

Here’s the PRC press release:

PRC Approves Postal Service Request for Exigent Rate Increase; Rejects Permanent Price Increases

Washington, DC, Dec. 24, 2013 – Today the Postal Regulatory Commission issued Order No. 1926 in Docket R2013-11 partially approving a request by the Postal Service for an exigent rate increase to offset losses suffered as a result of the Great Recession of 2008-2009.

In its majority decision, the Commission found that the Postal Service experienced financial harm as a result of the Great Recession and is legally entitled to implement price increases in excess of the CPI cap for less than two years. The Commission denied the Postal Service’s request to make the increases permanent. It found allowing the increases to remain in effect indefinitely would be inconsistent with fundamental postal policies underlying the price cap.

“The Commission’s decision closely follows the law we are charged by the President and Congress to uphold,” said Commission Chairman Ruth Y. Goldway. “The Postal Service will be reimbursed for exigent losses that can be reasonably quantified. We have determined that amount to be $2.8 billion to cover the 25.3 billion pieces of volume lost between 2008 and 2011. The funds will come from a rate surcharge that will last just long enough to recover the loss,” she added.

The Postal Accountability and Enhancement Act of 2006 requires the Postal Service to demonstrate to the Commission its need for an exigent price increase above the CPI cap by describing the exigent circumstances and showing why they necessitate the increase, showing that the proposed rates are reasonable and equitable, and describing the circumstances under which the increases could be rescinded or reduced.

The Commission determined that the proposed price increases were reasonable in amount, equitable in that they are approximately equal for all categories of mail, and necessary to maintain and continue needed postal services. However, the Commission also concluded that the Postal Service conflated losses that are a result of internet diversion with losses that were a result of the Great Recession, and that it failed to provide justification for permanent price increases in connection with recession-related mail volume losses.

In its order, the Commission directed the Postal Service to report quarterly on revenues generated by the rate increases, and to develop a plan to phase out the rates once they have produced the revenue justified by their request.

The 4.3 percent exigent rate increases are scheduled to be implemented in conjunction with the inflation-based rate adjustment of 1.7 percent (one cent for ordinary mailers), approved earlier by the Commission. The overall adjustment is 6.0 percent (a total of three cents from 2013 rates or 49 cents).

The Commission’s decision was issued on a 2-1 vote.

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